MOD Charges for a Home Loan

MOD Charges for a Home Loan

Applying for a home loan empowers people to arrange the necessary funds to finance their purchase of a house. However, since it is a long-term and high-value financial commitment, proper knowledge about the overall costs is essential. This knowledge usually includes awareness regarding interest rates, processing fees, and so on. This blog highlights all the crucial details about the MOD charges for a home loan. Read on to learn about these charges in detail.

What is MOD?

 A Memorandum of Deposit (MOD) is an important document in the home loan process, signed by both borrower and lender as an undertaking. It confirms the loan disbursal and states that the property is collateral for the loan. Once signed, the MOD is submitted to the local registrar to create an equitable mortgage deed, temporarily transferring property ownership to the lender until the loan is fully repaid. This document ensures legal and financial clarity between the borrower and the lender.

What are the MOD Charges for a Home Loan?

MOD charges in home loans refer to the additional amount you must pay aside from the processing fee. Usually, it ranges between 0.1% and 0.5% of the total loan amount. Upon breaking down these charges, borrowers understand the multifaceted structure of the processing charges and associated costs. 

The charges encompass various costs such as administrative expenses, documentation fees, the cost of creation and maintenance of MOD, and the fees for legal aspects of registering and releasing MOD. A potential borrower must have a complete understanding of these charges to calculate the total costs of the loan and avoid encountering unnecessary expenses. 

The Reserve Bank of India has mandated the lenders to ensure complete disclosure of the MOD charges to the borrower applying for a home loan. This helps borrowers to understand their financial implications and make informed decisions. So, lenders must comply with these laws set by the RBI.

Memoranda of Deposit charges vary considerably among lenders, affecting the overall costs of the loan. Also, some lenders allow borrowers to negotiate the MOD charges for a home loan. Applicants should note that fluctuation in the Home Loan interest rates also influences these additional costs. Hence, they should be aware of the present market conditions when applying for a loan.

Why Do Banks Impose MOD Charges?

Banks charge a MOD (Memorandum of Deposit of Title Deed) fee in order to make a legal claim of lien to the property for which the bank has provided a loan. The fee is not a fee paid to the bank; it is an office statutory government fee paid to the sub-registrar’s office to note the bank’s interest in the property.

Rationale for MOD fees:

• It serves as evidence that the borrower deposited the title deed at the bank.
• It gives the bank a legal entitlement to the property in the event of a default.
• The MOD prohibits the borrower from selling or transferring the property without satisfying the debt.

How MOD Works When Applying for a Home Loan?

A Memorandum of Deposits functions in the following manner in the case of a home loan:

• Undertaking the deposits: Once a borrower receives approval for their loan amount, they will have to deposit the property title deed to the lender. This commitment is formalised by signing the MOD.
• Calculation of MOD charges: After signing the MOD, the total charges are calculated, which range between 0.1% and 0.5% of the home loan amount. 
• Assurance of repossession: The MOD serves as a legal document assuring borrowers that they can repossess the property mortgaged upon repaying the entire loan amount. 

What are the Strategies for Borrowers to Manage MOD Charges?

The following are some effective strategies that borrowers can use when applying for a home loan:

• Planning repayment strategically: One needs to plan their loan repayments strategically so they can efficiently manage MOD charges. 
• Communicating with lenders: A borrower needs to communicate with lenders if they feel that the charges are too high and want to negotiate them. 
• Knowing the role of MOD in loan closure: Individuals need to have a thorough idea of the MOD charges so that they can navigate them when closing their loans. 
• Exploring refinancing options: Borrowers can even mitigate these charges by considering the refinancing of their credit.

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What is the Significance of MOD charges for a home loan?

During the home loan process, MOD plays a crucial role. Their significance is highlighted as follows:

• Offers a structured framework to the lenders for efficiently managing the lending process. 
• Highlights that the lenders are the rightful owners of the property mortgaged unless and until the borrower repays the loan.
• Shields the borrower from the lenders by assuring them of the ownership of the property if the borrower defaults on loan repayment.
• It clearly states the details of the property and that the borrower has secured a loan against it.
• This document contains details about encumbrance certificates and other essential papers.
• Once the borrower repays the entire loan amount, the lenders cancel MOD, transferring the ownership of the property back to the borrower. 
• It empowers lenders to auction the mortgaged property to recover the loan amount in case the borrower defaults.
• MOD protects the rights of borrowers on the property unless and until they pay off the loan amount along with the due interest.

After loan repayment, the MOD is cancelled by the creditor or the debtor, implying that the property rights have been transferred back to the borrower. 

How Can MOD Charges for a Home Loan Be Cancelled?

Once a borrower repays the loan amount, they can request the lender to cancel the MOD and set their property free. They can follow the steps below to accomplish the same online:

Step 1: Contact your lender

First and foremost, contact your lender and explain the reason for canceling the MOD charges. You can do this via email, over the phone, or even in person at their office. 

Step 2: Submit a request for cancellation

State the reason for wanting to opt for a Memorandum of Deposit cancellation. Also, fill out the necessary form and submit the required documents outlining the reason for the MOD cancellation.

Step 3: Enter all the necessary details

Make sure that the details that you are entering in the form are accurate. Some home loan-related information that you will have to provide in the form includes the loan account number, reason for cancellation, and so on. 

Step 4: Submit a written communication

Some lenders require you to submit a written request to cancel your home loan. Make sure that you comply with this. Once your request is processed, the lender will also confirm the cancellation of the MOD in writing.

Step 5: Keep checking the account status

The lender can also confirm the MOD cancellation through your account statement. So, monitor the transactions of your loan amount regularly to ensure that there are no unexpected deductions. 

People can also go for the cancellation of MOD offline if they are not comfortable with the online process. The steps are as follows:

Step 1: Collect the NOC from your lender to cancel the MOD charges for a home loan. Make sure that it contains all the necessary details.

Step 2: Ask your lender to share a deed receipt as applicable.

Step 3: Schedule a visit to the office of your registrar and request them to remove the lien on your property. 

There are several benefits that a borrower as well as a lender can get due to the involvement of a Memorandum of Deposit in a home loan.

What are the Advantages of MOD charges for a Home Loan?

The Memorandum of Deposit is associated with numerous advantages for a lender and a borrower. These include:

• Minimises costs: The MOD charges, including the stamp duty fees and other costs, amount to 0.1% of the loan amount. This is much less when compared to the interest rates and charges associated with the registered mortgages. 
• Simplifies procedure: Once the loan is fully paid, the lender themselves transfers the title deed of the property to the borrower. This saves the borrower’s hassles of visiting the lender again and again for property transfers. 
• Offers legal protection: The borrowers can take legal action in case the lender changes the loan terms or does not adhere to the terms mentioned. Evn, lenders can take legal steps if the borrowers do not pay the EMIs on time. 
• Prevents fraud: The MOD charges for a home loan contain all the details of the property and the terms and conditions of the home loan, as well as the details of lenders and borrowers. Thus, both the creditor and the debtor stay protected from fraud.  

Once you are thoroughly aware of MOD and the charges associated with it, you can proceed with the home loan application process. 

How to File a MOD Online?

In states like Karnataka, MOD can be filed online via the Kaveri Online Services portal, which allows users to prepare and submit documents electronically.

Steps to File MOD Online (Karnataka example):

1. Visit the official website: https://kaverionline.karnataka.gov.in
2. Register or log in using your credentials.
3. Go to “Document Registration” > Select “MOD Deed” under document type.
4. Fill out the required property and loan details (borrower name, bank name, loan amount, etc.).
5. Pay the applicable stamp duty and registration charges online.
6. Upload supporting documents (loan sanction letter, ID proof, property details).
7. Book an appointment for biometric verification at the sub-registrar’s office.
8. Visit the sub-registrar office with originals on the scheduled date for verification.
9. After successful verification, the MOD deed will be registered, and a copy will be available for download.

How to File MOD Offline?

If online services are not preferred or unavailable, borrowers can also file MOD deeds offline by visiting the local sub-registrar office.

Steps to File MOD Offline:

1. Collect Draft from Bank: Banks usually draft the MOD deed for you.
2. Visit Sub-Registrar Office: Take the MOD deed, identity proof, and property papers.
3. Pay Charges: Pay the stamp duty and registration fee via a challan at the office or designated banks.
4. Sign and Register: Both the borrower and the bank representative sign the document in front of the registrar.
5. Get Receipt: Once registered, you’ll receive a receipt, and the original MOD deed will be stored in the bank’s custody.

How Are MOD Charges for a Home Loan Calculated in Karnataka?

MOD charges in Karnataka are based on the loan amount and governed by the Karnataka Stamp Act.

MOD Charges in Karnataka (2025):

• Stamp Duty: 0.1% of the loan amount (Maximum ₹10,000)
• Registration Fee: ₹100
• Documentation Charges: ₹500 – ₹1,000 (varies by bank) 

Example:
For a ₹50 lakh home loan in Karnataka:

• Stamp Duty = ₹5,000
• Registration Fee = ₹100
• Total MOD Charges = ₹5,100 (approx.). 

Steps to Cancel MOD Deed (After Loan Repayment)

Once you repay the home loan fully, it’s important to cancel or release the MOD deed, so the lien on your property is removed.

Steps to Cancel MOD Deed:

1. Obtain NOC from Bank: After full loan repayment, request a No Objection Certificate (NOC) from your lender stating the loan is cleared.
2. Visit Sub-Registrar Office: Go to the office where the MOD was registered. 
3. Submit Required Documents: 
   • Original MOD deed 
   • NOC from the bank 
   • Identity proof 
   • Property documents 
4. Pay Cancellation Fee: A nominal registration fee (₹100–₹200) may apply. 
5. Complete Cancellation Process: The Registrar will record the cancellation. Your title is now free from the bank’s lien. 

Conclusion

Once you are aware of the MOD charges for a home loan along with other details, you can properly plan your mortgage. Additionally, you can optimise the loan amount and repayment tenure to minimise the interest on your home loan. You can even negotiate the interest rate on the credit to save substantially on the overall costs of your home loan. 

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